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What a month we are having! It's very funny that I started the month complaining about not getting a pullback but that's the beauty of admitting you are wrong -- you get to make new and improved decisions with your new information (see the "Microwave Oven Theory"™).

Because the market kept going up, we kept finding new positions, and had little reason to sell against my trading policies (see above). So, although I am very nervous about next week, we still have 106 open positions -- too many to fully list!

Not counting our September plays, which we mostly summarized last week, we closed 78 positions so far this month with an average gain of 117%. If we throw out that ridiculous Google gain of 1,975%, we get an almost believable 94% average return on an average hold of 8 days.

There were 16 losers and 70 winners with just 2 trades closed between –5 and + 5% (neutral). People, this is not normal in the extreme! Like I said last week, it's time to retire because it just doesn't get any better than this (although this week was better than last week so go figure!).

27 of our winners were doubles or better, and our lowest (closed) winner of the month was a Chesapeake Energy Corp. (NYSE:CHK) daytrade that returned 31% in 5 hours. Not normal at all! Just be happy we were there to take advantage of it.

For my new readers, usually we close a week out with perhaps 20-30 plays. Please go back through the archives to view some more typical months as I really, really don't want people to think this is what we do every day. Our job is to keep liquid and make fairly regular returns so we are in position to take advantage of runs like this (and also to be skeptical enough to not overdo it when the market inevitably corrects).

Currently I am a little bearish BECAUSE we didn't pull back much. I wanted a healthy consolidation, and this is not it yet, so let's tread carefully into the end of the quarter next week!

This Week's Picks:
Three of our biggest losers of the week were rolls from previously successful trades. We roll our profits so that we can feel good about exiting still hot positions once we extend past the 100-200% level of returns on the original play. A good roll is no more than 1/2 the profits from the original position, so we take at least our principal and a 50-100% profit off the table.

  • Setting stops at 30-50% on the new trade is really just playing with house money, but a loss is still a loss, and we gave back a nickel on the Microsoft Corp. (NASDAQ:MSFT) Nov $27.50s which stopped us out Thursday on our general cash call at .55.
  • We let 3 time winner Seagate Technology (NASDAQ:STX) drop 38% on the Oct $25s, and I should have known better than to play a near call on this super-volatile stock.
  • Williams-Sonoma Inc. (NYSE:WSM) was a proper (but still losing) roll, taking 1/3 of our 260% profits from the $32.50s, effectively rebetting the original amount on the $35s. We stopped out of that one at –50% in just 3 days, leaving us with a 200% gain overall, but what I like about rolling is it removes the temptation to let the original bet ride. Had we stayed with the $32.50s, which we sold on 9/19 at .90, we would have lost 1/3 of our total on Friday's .60 close.
  • Two of our other losers could have been avoided had I listened to Tom! Garmin Ltd. (NASDAQ:GRMN) and Caterpillar Inc. (NYSE:CAT) were both disasters that he specifically warned me against -- while I may go for long shots like this on a great week, where we can risk some profits, we don't fight the charts in a weaker market!
  • 4 housing puts went against me, Vornado Realty Trust (NYSE:VNO) (twice) Toll Brothers Inc. (NYSE:TOL) and Lennar Corp. (NYSE:LEN), and I swore off that sector for a while! As I said the other day in comments: "The market can stay irrational longer than you can stay solvent." John Keynes is attributed with saying it first, but I don't know where, and another major statement of his "In the very long run, we are all going to be dead." Is a part of my overall Zen philosophy.
  • We had 5 small losing oil trades, but those were to be expected as we tried to time additional drops. I resisted the temptation (thank goodness) to take longs on oil, or we would have had a lot more bad calls! We will see how it handles $60 next week before moving either way.

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Our winning trades were a mixed-bag of puts (mainly commodities), and calls (retail and Nasdaq), which were set of by a slew of what I considered to be good retail sales and CPI numbers ahead of the Fed, who's statement I wrote early in Wednesday's comments.

Google, of course gave us 4 big winners already and we are in round 2 of our Google calls this week. I just wrote the update, so I won't rehash those here.

  • We went to the well on ExxonMobil Corp. (NYSE:XOM) 3 times with Chevron Corp. (NYSE:CVX) and Chesapeake Energy Corp. (CHK) contributing 2 of our winners each, but I was surprised to see that oil puts only made up 14 of our 78 winning trades. I guess I was a little too conservative last week as I fretted about a bounce!
  • Texas Instruments Inc. (NASDAQ:TXN) gave us 3 winning trades with the Oct $32.50s returning 63% from the 6th and 86% from the 8th as we closed both positions on the 13th.
  • Target Corp. (NYSE:TGT) gave us 3 brackets of winners as they all closed on yesterday's paranoia. The $47.50s finished at $7.70 (up 285%), the $50s finished at $5.20 (up 316%) and the much newer $52.50s hit $3.10 (up 210%). I actually rolled my earlier calls into the $52.50s on the 12th and this is an example of how great a roll is when it does go your way.

So, to review, rolls are great when they go your way and save you from huge losses when they go against you. Let's get that on a T-Shirt! Why did I take a roll off the table when it was up 200%? Because it was up 200%! Don't be greedy!

Other stocks that were very, very good to us included:

  • Bed Bath & Beyond Inc. (NASDAQ:BBBY) which made a gain of 175% after 2 very solid weeks of gains, and looked a little toppy on Friday where we closed the 2 positions on the $35s for $3.30, up 200% (average).
  • Best Buy Co. Inc. (NYSE:BBY) is also worth a mention as it racked up 300% on the $47.50s, which closed at $6.50 on Wednesday as we rolled the 1/3 of the profits into the still-open Dec $57.50s for $2 (now $2.50 with a $1.50 stop).
  • A very good pre-earnings call on a Bear Stearns Companies Inc. (NYSE:BSC) spread on the 6th gave us a 130% gain on the call side (and we took 4 calls to 3 puts) as we closed out the Oct $140s for $3.10 (up 130%) on 9/15 as I became concerned about the sector and ended up plowing all of that money back into still-open puts on Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) (see below).
  • Consolation Prize Team Member Coach Inc. (NYSE:COH) was our luxury trade of the month with the $32.50s stopping out yesterday at $2.25 (up 231%) after a great two-week run.
  • Costco Wholesale Corp. (NASDAQ:COST) looked like it was going to the moon. and only our paranoid tight stop call saved us, as Wal-Mart Stores Inc.'s (NYSE:WMT) new drug policy panicked the sector. We were lucky to get out of the $50s at $2 (up 231%) after dropping $1 from the day's open! This is a great example of what happens if you don't roll a position! We still have the Jan $52.50s open on the half position we did roll on the 12th and those are still $1.90 (up 23%) but we are stopping out even at $1.55 if it comes to that.
  • E.I. DuPont de Nemours (NYSE:DD) still has 2 open positions, but we closed out the $42.50s from 9/8 on 9/15 at .75 (up 150%) and had great timing when we picked up the $40s on 9/11 for .80, now $1.90 (up 238%) as well as the pre-roll $42.50s on 9/14 for .50 (now .80 -- up 60%). We should be looking for any excuse to get out of the $40s and just let the profits ride at this point.
  • A tight stop took us out of Hewlett-Packard Co. (NYSE:HPQ) $35s on the 13th at $2.40 (up 140%), which was a good thing as we would not have gotten as good an exit as the scandal began to snowball last week!
  • We said a sad goodbye to 3 time winner Marvell Technology Group (NASDAQ:MRVL) as the Jan $21.50s finished Thursday at $2.50 (up 242% in our 2 week SOX run). As we said in comments, we're not going to fight the tape on this sector!
  • Timing is everything and our 2nd round of Morgan Stanley (MS) $70 puts (where I should have bought in if I hadn't gotten all excited and jumped in too early) stopped out at $1.15 (up 77%) Friday after we repicked the $70s for .65 on the 20th. I still hold part of this position open at .90.
  • Microsoft Corp. (MSFT) gave us one of our week's losers (see above), but also 2 winners with the Oct $25s stopped out Tuesday at $2.50 (up 86%) and the Oct $27.50s had to go on Thursday as it pulled back to .25 (up 66%) as we hate to go from a double to a position where the commissions wipe out a trade.
  • NIKE Inc. (NYSE:NKE) was our most ancient play of the group, a shocking 32 days old by the time earnings finally rolled around. It was so old (8/22) I forgot to track it but the $80s were sold on the initial excitement at $6.50 (up 319%) as it is too expensive to roll during a big move like that.
  • Overseas Shipholding Group Inc. (OSG) was a nice old trade for us as well, way back from this feature on 9/5. The $65 puts were taken off the table way too early (9/8) at $3.70 (up 95%). We still have the Jan $60 puts, now close to the money at $3.60 (up 140%) but we need a tight stop at $3 as this was intended to be a pre-roll.
  • Phelps Dodge Corp. (PD) was a really nice entry on the 5th, and the $82.50 put was taken off on the 12th as it made too much money to roll (similar to NKE) at $3.90 (up 225%).
  • Reynolds American Inc. (NYSE:RAI) looked so awful on the 19th that we shorted it on the 20th by taking the Nov $62.50 puts for $1.70, but we got out of it the next day at $2.50 (up 47%) after a big bounce off the 10% rule.
  • I thought I regretted getting stopped out of Consolation Team Member Tiffany & Co. (NYSE:TIF) on the 18th with the Jan $35s at $2.05 (up 105%), but then I saw the rest of the week! This is a 3-time winner for us so it's going to be a blue-box Christmas!
  • I'm not even going to get into the oil trades as I dumped them all Wednesday, more luck than skill as I just didn't want to leave them open on Thursday when I was going to be away. Still, our last batch of picks are still up and running as they have been weaker than the rest (this is why I picked them!) of the patch.
  • I will just close this very partial summary by discussing ExxonMobil Corp. (XOM), the only oil put I still have open. We were in the $65 put 3 different times in 7 days so you can see why we discuss it so much in comments! Groupthink allowed us to hold on through a rough patch on the 18th, as the team decided the run-up not only should be ignored but presented a double down opportunity!
  • Positions opened were at $1.40 on the 13th, .95 on the 18th and $1.40 on the 20th -- closing them all out near the end of day at a healthy $1.90 for an average gain of 80%.

Setting stops is very important, but so is knowing when someone is just trying to trigger your stops and, as I've said before, the oil market moves in very mysterious ways!

As soon as I figure out how to upload it, I will be posting a spreadsheet, which will be a precursor to what is going to be on the pro site so please feel free to comment so we can make it as useful as possible to everybody.

Read all of Phil Davis's articles on Seeking Alpha.

Source: Options Trader: Weekly Wrapup